19. Operating leverage (S10.2) A project has fixed costs of $1,000 per year, depreciation charges of $500

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19. Operating leverage (S10.2) A project has fixed costs of $1,000 per year, depreciation charges of $500 a year, annual revenue of $6,000, and variable costs equal to two-thirds of revenues.

a. If sales increase by 10%, what will be the increase in pretax profits?

b. What is the degree of operating leverage of this project?

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